Financial Crisis – Fixed Income essay paper
Financial Crisis – Fixed Income
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Individual Essay – Financial Crisis Essay Description
Fixed Income
Financial Crisis – Fixed Income
1 Description and Guidelines
This year marks the fourteenth anniversary of the 2008 financial crisis. Looking back at those fourteen years, we experienced a very solid market rebound in equities and our economy achieved full employment. While we began 2022 with the expectation of a growing economy, we are now facing what may become yet another financial crisis due to the current pandemic, inflation, and rising debt. The level of U. S. government debt as of the third quarter of 2021 was $28.5 trillion. This represents an increase of over 166% from 2008 where the total debt was $10.7 trillion. Many economists believe that this level of debt is unsustainable. Financial Crisis – Fixed Income
The goal of the essay is to explore possibilities for the next financial crisis. Financial Crises are not necessarily linked to banking or housing markets because generally, crises occur in different ways and in different markets. This is not to say that markets are independent; for example, the banking sector is now very different than it was twelve years ago. In this assignment you will develop a strategy to hedge risk should a market or sector be affected by another financial crisis. We want to bet on or against a particular sector if another financial crisis occurs. Where do you think that the next financial crisis is going to hit? How bad will the next financial crisis be? These are the types of questions that we want to think about in this essay. Financial Crisis – Fixed Income
The deliverable for this essay is a two-page, single-spaced write-up that will construct an argument in favor of a risk management opinion. The two-page limit includes all graphs, references, and supporting arguments. In other words, the two-page limit includes everything that you think is important to convey your message. You do not need to add a cover page to the document; however, your document must contain the names and group number as well as the document title (Financial Crisis Essay). For example, your opinion could be as follows, Financial Crisis – Fixed Income
Yes, we believe that the financial sector is healthy, and the regulation and stress testing of the large banks have been a success. We recommend that investors increase their allocation to the banking sector.
You should support argument with data and be forward-looking. While it is very difficult to predict the market, it is important to notice that you will write this essay as a professional risk manager. Therefore, your potential clients expect you to have a view and to defend that view. Otherwise, they will not pay you a management fee. Below are some suggested steps that you could take to construct your argument. You are free to follow or use a different approach; these are only suggestions. Nothing prevents you from constructing your essay in a totally different way.
Your summary may include the following elements:
• Define a high-risk universe: This will allow you to focus on one index or investment pool. For example, the US government debt or the banking sector or emerging market debt sector.
• Support your opinion with data: While this essay is more of an opinion piece, it will be more convincing to your potential investors if you can demonstrate that you have studied the data and anchored your view on solid data.
• Construct a forward-looking opinion: As mentioned previously, we are trying to produce an opinion as close as possible to a practical and real-life investment advisory business. In this context, you need to clearly express a view and give clear guidance of investment advice with respect to the next financial crisis.
The written report for this project should be single-spaced and completed using appropriate report formatting. For additional direction on formatting, we refer you to the APA Style Manual available in the Course Documents tab in Blackboard. Your summary must include all necessary tables and charts in the body of the report, additional appendices that go beyond the length maximum of two pages are not allowed. Financial Crisis – Fixed Income
2 Financial Crisis Essay Rubric
You will be evaluated on a scale of 1 to 5 for each of the following components of your written essay for a total point value of 20 points.
Format – Assignment parameters (length, subject, objectives) observed, clear and coherent focus (good sense of audience); orderly development of ideas; sentence fluency coherent, unified, varied; correct spelling, punctuation, capitalization; appropriate word choice.
Originality of risk factors and risk assessment – Explain clearly what the risk factors are and the universe that those risk factors will affect the most. Explain how your risk assessment adds value. Determine the risk measures that are the most relevant in your methodology and estimate clearly all the downside risk measures associated with your view of risk if things do not go in the direction that you are thinking.
Analytics – Clearly identify the source of data and the relevance of the data in the context of your essay and risk strategy. Provide a clear explanation, relevance, and justification of the analytical models.
Recommendation and Forecasting time horizon – Provide clear recommendations and defend your view in a rational way. Provide a clear time-horizon for your risk assessment.
